Richard Barkham, the chief global economist of commercial real estate investment firm CBRE, expresses concern over Class B office buildings facing an upheaval due to their inability to attract tenants. He notes their vacancy rates can reach as high as 80%. Barkham predicts a significant shift in the office market, stating, 'The banks are going to have to dispose of that real estate... over the next... two to three years... we'll see a wave of offices going back to banks, firesold and either demolished or converted.' He highlights the urgency of the situation as banks quietly divest troubled properties.
The ongoing work-from-home trend and an impending wave of maturing debt are compelling factors driving distress in the office sector. Experts anticipate that as vacant offices arise from this distress, they may be sold off in fire sales as owners attempt to mitigate losses. This presents a silver lining: the conversion of former office spaces into apartments. As Richard Barkham adds, 'This will add more housing supply to the pipeline,' hinting at a potential solution to housing shortages.
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